Stores See January Sales Fall; Wal-Mart Posts Rise

By AP&nbsp|&nbsp

Posted: Thu 11:04 PM, Feb 05, 2009&nbsp|&nbsp

Updated: Thu 11:28 PM, Feb 05, 2009

NEW YORK – Shoppers passed by the jewelry counter in January, delayed buying their favorite perfume and even skimped on buying clothes for their growing kids. If they looked at status handbags, they put them back on the shelf and walked away.

The dismal January sales that retailers reported Thursday foreshadow a cold spring as consumers worry about massive layoffs and their dwindling retirement funds. Bigger-than-expected declines crossed the spectrum from Gap Inc. to luxury retailer Saks and the Children's Place. Others, like Macy's and Limited Brands Inc., did better than forecast but still saw sales drops.

Wal-Mart, the world's largest retailer, was among the outliers, reporting sales gains that beat Wall Street's forecast. The discounter has benefited from consumers' focus on necessities like groceries and on finding cheaper options for other items.

What's clear, he says, is that nothing these days is recession proof — even makeup. Estee Lauder Cos. reported a 30 percent drop in fiscal second-quarter profits as shoppers cut their spending on makeup, skincare and perfume. Chief Operating Officer Fabrizio Freda said he has noticed consumers are delaying purchases, especially in fragrances.

January sales at established stores fell 1.6 percent, according to the International Council of Shopping Centers-Goldman Sachs tally — not as bad as expected but still the fourth consecutive monthly decline. The index was helped by the better-than-expected results from Wal-Mart, which accounts for just over half the index. Excluding Wal-Mart, sales fell 4.8 percent. The tally is based on same-store sales, or sales at stores open at least a year.

While January is the least important month of a retailer's sales calendar, the figures confirm how weak consumer spending is. Merchants couldn't even count on the usual post-holiday lift from shoppers redeeming holiday gift cards. Sales of gift card sales were down because shoppers were focusing on deals, or just not buying. And with the economy deteriorating, the ICSC's chief economist Michael P. Niemira expects sales to keep falling through at least spring.

Shoppers are worried about slumping home prices, tight credit and shrinking retirement accounts. But the biggest concern is job security — and that may only be reinforced by data Thursday showing that new claims for unemployment benefits jumped to their highest level in more than 26 years. The unemployment rate — now at 7.2 percent — is expected to jump to 7.5 percent, a 17-year peak, for January when the government releases new figures Friday.

The harsh environment is sending a number of stores into liquidation, with Circuit City and discount clothing chain Goody's Family Clothing among the biggest names. Fortunoff, a chain of housewares and jewelry stores in the Northeast, said Thursday it has filed for Chapter 11 bankruptcy protection and is seeking a buyer.

Those retailers who are surviving are slashing prices to try to pull in shoppers. Already many chains are discounting spring merchandise. They're also looking for ways to cut costs. Macy's Inc., Bon-Ton Stores Inc. and apparel maker Liz Claiborne Inc. have all announced layoffs in recent days.

Stores are also expected to report dismal earnings figures over the next few weeks, with fourth-quarter profits likely to fall more than 24 percent, according to Ken Perkins, president of research company RetailMetrics. Excluding Wal-Mart, that drop is expected to reach almost 31 percent.

The big exception in Thursday's parade of weak sales was Wal-Mart, which posted a 2.1 percent increase in same-store sales, excluding fuel. That was better than the 1.1 percent gain that analysts had expected. The company cited strength in grocery products and health and wellness items.

Rival Target Corp. reported a 3.3 percent decline, though that wasn't as bad as analysts expected. Still, the discounter said its fourth-quarter results will fall short of forecasts due to pressure from markdowns.

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